This article has been updated to incorporate additional reporting.
Oregon Health & Science University’s proposed takeover of Legacy Health would create a merged system that controls five out of six hospitals in Multnomah County and seven out of 13 hospitals in the Portland area, according to a new state report.
On top of that, the beefed-up OHSU system would control the state’s only hospitals offering general pediatric services and advanced trauma care.
The new report issued by the state’s health care merger review office shows the first-blush impressions of regulators who will determine whether the long-delayed, high-stakes merger proposal goes forward — at a time when hospital mergers and their effects on costs are under increasing scrutiny nationally.
The application submitted by OHSU a month ago portrayed Portland-based Legacy as an all-but-failing enterprise, contending that a merger would help both entities and patients. Supporters say a merger would prevent Legacy from being swallowed up by a national chain.
Now those ideas are slated to undergo far greater scrutiny, as officials have announced that in addition to state regulators’ initial review of the proposal, the state will conduct a more in-depth look while also naming a “community review board” to ensure public input in the transaction. Those interested in serving on the board can email [email protected].
“The healthcare merger for OHSU and Legacy health is a monopoly which will hurt Oregonians. Do not allow this merger."
The state office overseeing the review was formed by a 2021 law intended to protect consumers, patients and workers from potential harms due to consolidation, such as higher costs, reduced quality and lack of competition.
The state review takes on additional importance because while the Federal Trade Commission normally addresses mergers’ anticompetitive effect, OHSU President emeritus Danny Jacobs in September told The Lund Report that the university believes it is exempt from federal antitrust oversight.
“We’re a public entity, and we don’t qualify as a covered entity,” he said.
Interestingly, the OHSU application portrays the combined system’s market as statewide, contrary to how the FTC often interprets hospital markets. That approach in effect minimizes the would-be merged system’s market power. Previously, the federal agency has successfully blocked hospital mergers on the basis of anticompetitive market concentration in a single urban area, such as in Hershey, Pennsylvania.
Already, critics are lining up to air concerns about the merger, asking regulators to reject the acquisition, arguing that it will hurt access.
“The healthcare merger for OHSU and Legacy health is a monopoly which will hurt Oregonians,” one unnamed commenter wrote. “Do not allow this merger. This merger would take away Oregonians choices and will lead to more health disparities and only look to profit margins. This will hurt doctors, nurses and ultimately Oregonians”
Public agency would grow, invest
Lawmakers granted OHSU, a public agency, semi-independent status in 1995 in exchange for various promises — including that it would commit to follow Oregon’s public records and meetings laws, except when it comes to extremely sensitive business secrets that its non-government competitors need not disclose.
OHSU leaders argued in the application they submitted to regulators in September that the public university would invest in the nonprofit’s six hospitals and the combined workforce could provide more and better patient care.
Those upgrades would mean giving OHSU a monopoly on certain services, according to the report.
OHSU and Legacy Emanuel Hospital are currently the only Level 1 trauma hospitals that can care for severe injuries. Doernbecher Children’s Hospital at OHSU and Randall Children’s Hospital at Legacy Emanuel are also the state’s only general children’s hospitals. The acquisition would mean OHSU would have no competition, according to the report.
Similarly, OHSU’s Transgender Health Program and the Gender Care Services Program at Legacy are two significant providers of gender-affirming care, and regulators wrote in the report that the acquisition could narrow options for care.
“Liability shields significantly reduce the financial incentive hospital corporations have to keep patients safe. Further, the lack of litigation keeps the medical errors out of the public eye.”
Regulators wrote they will need more analyses to determine how the acquisition will affect primary care, as well as oncology, geriatrics, gastroenterology, cardiology and other speciality services.
Most of the country’s hospital markets are “considered highly concentrated” with one or two systems, regulators wrote. While hospital consolidation can lead to better efficiencies, academic studies have found that less competition means higher prices for patients, according to the review.
Other research cited by the review found mixed results on whether consolidation leads to better care, according to the review. Additional research shows that hospital consolidation puts downward pressure on workers wages that is lessened with strong union representation.
OHSU has promised to limit layoffs of union workers in the short term if the merger goes through, and the deal is backed by unions that represent many health care and hospital workers, including SEIU Local 49, AFSCME and the Oregon Nurses Association.
However, the Oregon Trial Lawyers Association registered its opposition on Monday because the deal would extend OHSU’s caps on lawsuit damages to Legacy hospitals. Injured patients have 180 days to take legal action regarding alleged malpractice at OHSU and there is a cap on how much they can receive in compensation. Other patients generally have two years to sue, and without a cap.
The liability shield means no compensation for patients who need more than the 180-day window to identify malpractice as the cause of an injury or are reluctant to come forward because of mistrust of the medical system, according to the trial lawyers.
“Liability shields significantly reduce the financial incentive hospital corporations have to keep patients safe,” according to the trial lawyers’ letter signed by its lobbyists, Arthur Towers and Cassie Purdy. “Further, the lack of litigation keeps the medical errors out of the public eye.”
If the acquisition goes through, OHSU would control all of Legacy’s assets except for its charitable arm Legacy Health Foundation and Legacy’s 50% ownership of PacificSource health plan.
In anticipation of the merger, Legacy is seeking to spin off its part-ownership of health insurer Pacifisource in a separate transaction also under review.
Clifford Davidson, an attorney with the Snell & Wilmer Law Firm, submitted a letter on behalf of an unnamed “nonprofit devoted to health equity in Oregon,” asking regulators to deny OHSU and Legacy’s request to fast-track the PacificSource transaction, saying there needs to be enough time for the public to review the proposal
“This is especially so, given both OHSU’s and Legacy’s historic harms to minority communities in Portland and beyond,” Davidson wrote. “The equity issues that this merger presents are significant.”
In addition to emailing comments to [email protected], people can leave a voicemail at 503-945-6161 or fill out a public comment form.
